Yesterday's flash Harmonized Consumer Price Index indicated a drop in EMU price rises to 0.5%. Given the ECB's primary target is price stability, markets are widely anticipating tomorrow's ECB meeting will see overnight interest rates reduced to negative levels.This would have banks less likely to deposit daily surpluses in the ECB overnight and more likely to loan them out. They would also commit a smaller portion of liquidity to paying down liabilities previously acquired with the ECB. Both events allow banks to more easily match short-term liabilities with long-run assets and increase lending. The expansionary policy would apply downward pressure on the euro; it could also lift stock markets.Wednesday, 4 June 2014
UPCOMING ECB RATE CHANGES
Yesterday's flash Harmonized Consumer Price Index indicated a drop in EMU price rises to 0.5%. Given the ECB's primary target is price stability, markets are widely anticipating tomorrow's ECB meeting will see overnight interest rates reduced to negative levels.This would have banks less likely to deposit daily surpluses in the ECB overnight and more likely to loan them out. They would also commit a smaller portion of liquidity to paying down liabilities previously acquired with the ECB. Both events allow banks to more easily match short-term liabilities with long-run assets and increase lending. The expansionary policy would apply downward pressure on the euro; it could also lift stock markets.
Saturday, 24 May 2014
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